Johnson Matthey eyes £40m profit boost from weak pound

Speciality chemicals group Johnson Matthey increased sales 6% to £822m in the first quarter thanks to strong sales growth for its vehicle catalysts, while profits could be boosted substantially by weakness of the pound.

Underlying profit before tax for the full year was said to be "broadly in line" with last year at constant currency rates, after the cost-cutting last year, but will increase by up to £40m at the reported level if rates if they remain as they currently are.

Otherwise, Johnson Matthey's management believes the UK's decision to leave the EU will not have a long term material impact on the business.

In the first quarter, the largest division, Emission Control Technologies, which makes exhaust catalysts for petrol vehicles, generated a 9% increase in sales to £521m at the reported level, or 5% at constant rates. Light duty vehicles provided the bulk of growth as the slowdown in demand for Class 8 trucks in North America held back growth, though is expected to rally as the year progresses.

Elsewhere overall demand was stable for the Process Technologies, Precious Metal Products and Fine Chemicals divisions.

Sales in Process Technologies grew by 3% to £134m, but down 1% at constant rates as sales growth in chemicals from solid demand for petrochemical applications offsett reduced demand in the oil and gas businesses. Profits benefited substantially thanks to last year's cost-cutting, but market conditions were said to remain challenging.

Precious Metal Products' sales increased by 6% to £91m, up 1% at constant rates, as it benefited from platinum volatility to offset manufacturing weakness. Profits were down due to platinum group metals

Sales in Fine Chemicals were flat at £59m, but down 5% at constant rates as active pharmaceutical ingredient (API) manufacturing business was hit by timing of orders. Underlying operating profit for the division was lower.

New Businesses increased sales 14% to £43m, but remains lossmaking, with good demand for battery materials and an early contribution from the recent water technologies acquisitions made.